Infinity to Buy Alliance, Gaining 7 Radio Outlets

By ANDREA ADELSON

Published: September 23, 1995

The Infinity Broadcasting Corporation, already the nation's largest radio broadcasting company, agreed yesterday to pay $275 million for the seven stations, all in major markets, owned by Alliance Broadcasting Inc.

Three of the stations are in San Francisco, giving Infinity an entree in the only big market where the company had no toehold.

The deal appears to have been struck in anticipation that Congress will lift the limit on the number of stations that broadcast companies may own, now set at 20 FM and 20 AM stations. The legislation would also remove limits on the number of stations a broadcaster can own in a single city, currently set at two AM and two FM stations.

The proposed buyout of Alliance, based in Walnut Creek, Calif., would put Infinity, based in New York, over the top on both counts. On completion of the deal it would end up with 23 FM and 11 AM stations, and in Dallas alone it would have four FM stations and one AM outlet.

In the meantime, the agreement is subject to Infinity's obtaining temporary waivers to operate the stations under current Federal Communications Commission rules, Farid Suleman, Infinity's chief financial officer, said yesterday.

"It's a home run," said Gary G. Stevens, a radio broker, adding that Alliance had assembled its station group piecemeal for less than $100 million. "What we're seeing is every station group owned by institutional equity is on the block because prices are at an all time high. This is the time to get out."

Alliance's FM stations in Dallas and Detroit will greatly increase Infinity's concentration in those cities, where some of its existing 17 FM and 10 AM stations are situated. In Seattle, where Alliance owns an unprofitable outlet, KYCW-FM, there is no overlap with an Infinity station.

Analysts said Infinity was paying a rich multiple for Alliance, which in 1994 had estimated revenue of $34 million and $4 million in cash flow. As an indication of the company's momentum, Alliance is expected to generate $16 million in cash flow this year.

"Normally, you pay a high multiple for stations showing tremendous growth," said Richard Blackburn, of Blackburn & Company, an Alexandria, Va., radio broker.

Despite the high price, the deal fulfills a goal outlined by Mel Karmazin, president and chief executive of Infinity, at a trade conference earlier this month, to beef up market share in the company's markets. "Mel may be the only person this price makes sense for," said J. T. Anderton, managing partner of Duncan's American Radio, a trade publication that tracks the radio industry.

Infinity recently agreed to pay $1.7 million to settle F.C.C. indecency complaints against Howard Stern, its best-known program host.

The deal would push Infinity past Capital Cities/ABC as the top-billing broadcaster in Dallas, generating combined revenue of $44.5 million, and in Detroit, where revenue would be $25.3 million, Mr. Anderton said.

Alliance's owners are reaping the reward for reviving stations that had won back listeners but had not been fully recognized by advertisers, said W. Timothy Wallace, a media analyst for S. G. Warburg. "Infinity has a tremendous track record growing station revenue," he said.

The strategy of Alliance, founded in 1990, became "looking for dogs with good signals," said its 46-year-old founding president, John P. Hayes Jr., former president of the Fairmont Communications Corporation in San Francisco and a former NBC Network station manager.

The price Alliance won for its stations represents an enormous return for Mr. Hayes, other group executives, and the company's New York investment partners: Goldman, Sachs Group L.P. and Odyssey Partners L.P.

In the largest radio deal ever, the Chancellor Broadcasting Company agreed in August to pay $395 million for the 17 radio stations of Shamrock Broadcasting Inc.

Infinity's merger with Alliance will create a combined company of 34 stations and estimated revenue in 1995 of $375 million. If the Westinghouse Electric Corporation completes its acquisition of CBS, the combined company will have estimated revenue of $459 million in 1995 from its 39 radio stations.

In addition to KYCW-FM in Seattle, the six other stations involved in today's deal are KYNG-FM and KSNN-FM, Dallas; KFRC-AM, KFRC-FM and KYCY-FM, San Francisco, and WCYD-FM, Detroit.